Dankner Selling Super-Sol for NIS 2.4b

The first serious financial reaction to the social protest?

Nochi Dankner is selling control of Super-Sol, Israel's largest supermarket chain, for NIS 2.42 billion.

The deal was signed late Tuesday between Discount Investment, one of the main holdings of Dankner's IDB group; British real estate investor Leo Noe; and Isralom, a company owned by Canadian-American Matthew Bronfman and his partner Shalom Fisher, IDB Holding announced on Wednesday. Bronfman and Fisher already own a 18.56% share of the supermarket chain.

Nochi Dankner could face a derivative lawsuit by shareholders.
Olivier Fitoussi

Discount Investment, which owns 46% of the chain and has 50.02% of the voting rights, signed a nonbinding memorandum of understanding to sell its stake to a group of foreign and Israeli investors, IDB said in a statement.

The amount reflects a share price of NIS 24.18 per share, a 47% premium on the stock's closing price on the Tel Aviv Stock Exchange on Tuesday. The TASE was closed for the rest of the week for the Sukkot holiday and will reopen on Sunday.

Super-Sol has a market cap of NIS 3.57 billion, and the share has lost 19% of its value so far in 2011.

In any case, IDB will not be getting all its money quickly: A payment of NIS 650 million will be made at the time of the deal's closing, which is expected no later than December 15, and the remaining NIS 1.77 billion will be paid within five years.

The deal is subject to receipt of various approvals, including that of the Israel Antitrust Authority, the company said.

Super-Sol, supermarket
Sivan Faraj

Bronfman is part of a group that controls Israel Discount Bank, Israel's third-largest bank. Bronfman and Fisher have negotiated over such a sale with Dankner four times in the past, but each time Dankner decided to hold on to Super-Sol.

The agreement was signed this week, only a day after draft recommendations of the committee on economic concentration were revealed, and following months of social protests aimed especially at high food prices and Super-Sol in particular. Student organizations even threatened a boycott of Super-Sol if it did not lower prices, which it hurried to do in response.

Israel has recently taken aim at large conglomerates and is passing new legislation to force them to sell off either financial or other "real" assets and boost competition. IDB Holding chairman Dankner said he had to consider the attractive offer seriously, beyond his personal connection to the supermarket chain.

IDB, under pressure to divest certain assets, has been moving a large part of its activities abroad.

"Since 2003, I am acting aggressively to reduce the group's activity in Israel and increase its activities and assets outside Israel," Dankner said in a statement. "We've sold dozens of companies and businesses and expanded our activities abroad."

It is not clear what the fate of the present management will be, including CEO Richard Hunter, but IDB will keep two directors on Super-Sol's board for a year after the deal closes.

An opportunity for antitrust intervention

The sale of Super-Sol is an opportunity for antitrust commissioner David Gilo to make a number of demands as part of his approval of the deal. He could require splitting up the existing company into a number of parts and not allow the sale of the entire business as a single entity, said one of the leaders of the food price protests. For example, in past months the Antitrust Authority has supported the sale of branches of countrywide chains and the declaration of regional monopolies in areas where a chain operates with no competition. This is meant to limit a chain's ability to raise prices in areas far from the center of the country where there is little competition.

A senior executive in the food industry told TheMarker he expects little change in the running of Super-Sol in the near future, not increased pressure on suppliers.